Is a Vacation Timeshare a Good Idea?

By moneygodmother

More than ready to get away and a vacation timeshare sounds perfect? Or is it? 

Like me, you may often receive calls offering a “F-R-E-E weekend vacation” at some upscale resort. Sounds too good to be true? Here’s the catch: You must listen to a high-pressure sales pitch to buy into a timeshare property. Whether you buy or not may depend on if you can handle all that sales pressure.

So to see how the timeshare pitches work, I persuaded my husband to go with me. It was an eye-opening look at how sales pros work magic to get couples to sign on the dotted line in after an hour or so. And speaking from experience – It. Is. High Pressure. But many folks must end up buying, or this sales tactic wouldn’t be so popular.

When we arrived at timeshare central…

We heard three couples similar to us talk as we rode the elevator to the “luncheon,” with one spouse usually reassuring the other about withstanding the timeshare pitch:

•  “Listen, we aren’t buying, right? Don’t talk me into it!”
• “Let’s get this over and leave as soon as we can say no….”
• “We’re not buying one! You either?”

All the couples seemed of like minds in regard to buying a timeshare….So far.

As the elevator opened, super-friendly staff greeted us, ushering each couple individually to a small table. Suddenly this was not a group meeting, but a one-on-one. About 50 to 60 agents filled their tables for the 2-hour morning session (and would soon do the same for the afternoon session).

Thus…A timeshare sale begins

After only 20 minutes or so with a sales agent, some couples departed. Just 20 minutes! Most clutched a white gift bag. After 2 hours, most had left the room. Few did not leave carrying that white bag. After 3 hours, our sales agent was still working to convince us…adding more “points” and dropping the sales price frequently, and even getting her boss to step in and offer us “unbelievably awesome, unheard-of” incentives. With every new tactic, it seemed like their message was “Do you know what we’re offering you won’t last and you still aren’t biting…What is the matter with you?!” It was getting confusing…and at the same time, really, really tempting.

“What would it take for you to sign today?” a fresh sales duo pressured each of us, trying to work one against the other. We literally said “no” numerous times, but they didn’t want us to leave without signing up. Finally, when the afternoon “customers” were coming in, and almost in a fit of anger, the “boss” came over. He ushered us out, admonishing that we’d be sooooo sorry we passed up this one-time only offer. “Now move along and let us talk with serious buyers…no more questions…you missed out, so leave.”

The telltale “welcome” bag

Later we learned that the white bag was the “thank you” for the sale. So, all three couples on the elevator with us had purchased a timeshare! Wow. The pressure may have been too much, or maybe they felt a timeshare made sense for their family.

At any rate, they signed a contract, made a hefty deposit, and were now the proud owners of a week in a condo somewhere. And along with that, paying some annual costs. Every year. Forever. Even dying doesn’t let you out. Is that a bad thing or insurance against inflation?

How to know if a timeshare is right for you

At any given time, more than 1,000,000 timeshare owners are seeking to end their timeshare ownership, according to industry data. So I asked Gordon Newton, president of Newton Group Transfers and timeshare expert, to share his insights. Here are his answers to the following questions:

1. Lots of folks have timeshares. Doe it ever make sense?

If you can find a fixed-week timeshare at a location you would visit annually anyway, that may be a good thing under these circumstances:

• Someone else has paid for and you can get it for free, or pennies on the dollar. There are many of these out there because so many timeshare owners just want someone to take over their annual maintenance fees.
• It has a reasonable maintenance fee, and does not have a history of frequent or drastic increases.

There are still these downsides:

• The potential for special financial assessments.
• If you can’t use it or rent it (or find someone else to use it), you are still obligated to pay the maintenance fee.
• Once you no longer want it, you may need to pay an exit company to help you get rid of it if you can’t find someone to take it over as you did.

2. What can I expect to pay for the initial purchase? A range?

If you buy from a resort, the national average for a one-week interval was $22,180 in 2017. The low end would be $0 because there are hundreds of thousands of timeshare owners wanting to get out and willing to give them away. On the high end, there are some timeshares that have been sold for as much as $100,000 and even higher. 

3. The timeshare model uses a point system – but the value of a point is confusing. How do I know what points are actually worth and if I got a good deal? 

Each developer has a different system to value points, so it’s hard to give a blanket answer. Typically, more points will get you the ability to book at better properties. For example, booking a trip in Hawaii usually requires more points than booking in Branson, MO.

The bigger concern with the points system is that it allows resorts to oversell. One of the biggest complaints we hear is that people can’t actually use their points to book a vacation.

4. Can I negotiate the sale price?

You can always negotiate the sales price up to and including walking away if you don’t get exactly what you want. 

5. What exactly does it mean that I “own” a timeshare?

That is a great question because in many cases, you don’t really “own” anything, and even when you do, it is not anything of value. Some timeshares are actually deeded properties. So in that case, you would technically own real estate, albeit the worst form of real estate you could own – the kind that has a no value, or perhaps a negative value.

Many timeshare owners come to us still believing their timeshare has some financial value. Realize that timeshare owners who believe their timeshare has some form of financial value are more susceptible to scams. For example, a common scam is one where con artists call unsuspecting timeshare owners and say they have a buyer for their timeshare but the timeshare owner needs to first put money in escrow to pay for taxes, transfer fees and/or attorneys fees. An educated timeshare owner realizes their timeshare has little to no value, so they would likely not fall victim to such a scam.

6. So I paid upfront for the right to have a place for a week and then I pay a yearly fee – is that bad? 

Let’s look at what you are paying. According to available industry statistics, the average annual maintenance fee is about $980 per year.

Let’s assume you financed your purchase price (average of $22,180) as many do. You now have a monthly mortgage payment of roughly $211. This payment is based on getting an interest rate of 8% – which is lower than most resorts internal financing and FAR lower than any credit card interest. This means you will be paying $2,533 per year for your mortgage, plus $980 per year for your maintenance fee. That brings your total annual payment to $3,512 per year for a one-week vacation. If you exchange your week or points for a different location than your home resort, that will add roughly $200 to your annual payment and if you are in a network such as RCI or Interval International, that will add close to $100 per year too. This equates to over $500 per night, given that a timeshare week is typically 7 nights. I don’t know about you, but I can find some really nice places to stay for far less than $500 per night. Now 15 years down the road, once you have paid it off, your annual stay will drop to $980 (plus any exchange fees). This will put your nightly rate at roughly $140 per night assuming your fee is around the national average. So I would say if you buy from the resort, it’s a bad move financially.

7. Sure maintenance fees will increase but so does the cost of a vacation. About what should maintenance run? Is that all I must pay, or are there other hidden fees?

The average annual maintenance fee for a one-week timeshare interval was $980 in 2017. Historically, timeshare maintenance fees have increased at a rate higher than inflation. If you are a part of an exchange network, you also pay an annual fee for that (average of $94/year) as well as an exchange fee (average of $214) anytime you exchange your week.

You are always subject to a special assessment. This is a fee spread among the owners for any big expense that comes along. For example, if you own a resort in Florida, there is always the potential for tropical storms and that increases the likelihood you have a special assessment. 

8. Can I rent a timeshare directly from an owner?

Yes, there are many owners who would gladly rent to you, as they can’t get rid of their timeshare, can’t use it, and still have to pay their annual fee. Just be sure to rent from someone you know or via a bona fide third party, as the potential to be taken advantage of is high.

Please also note that some resorts actually ban renting. Those that do, can – and will – cancel reservations made by (or for) non-owners. Why? Because the resorts do not like competition – they are often trying to rent their inventory at the same time.

9. Seems like a timeshare goes forever, even if I die or don’t want it anymore?

Yes, most timeshare agreements are written in perpetuity, which means they can pass down to your heirs. We encourage people who do not want to burden their children or grandchildren with a timeshare to find help to end their ownership.

10. Okay, I bought a timeshare. The salesmen were just so hard sell. Now I regret it. What are my options? 

You have a few options. If it is within your rescission period (varies by state) you can actually cancel your contract. You need to do it in writing and if possible, hand-deliver it with a request for acknowledgment and follow that up with a certified letter. If you cannot visit the resort, then sending a certified letter is the next best option.

After the rescission period, your options to get your money back decrease significantly (to almost zero). If you owe money on your timeshare, then giving it away or selling it isn’t an option.

Going back to the resort and asking for their help, could actually put you in a worse position as the resorts have been known to up-sell customers seeking to get out, by telling them a better plan is easier to cancel…which later proves to also be untrue.

In the end, you will likely need the services of an attorney or timeshare exit company who can help you end timeshare ownership. If you find a buyer yourself who is willing to purchase, use a trusted escrow company to handle the transaction and make sure it all goes through.

What if you just want out?

Due to the lack of a resale market, timeshares typically don’t have value. Unethical predators often prey on the fact that people assume their timeshare increases in value like traditional real estate would, but that could not be further from the truth.

The rampant scams in the timeshare exit space is one reason Newton wrote the Consumer’s’ Guide to Timeshare Exit,which helps consumers be aware of what to look for when it’s time to end timeshare ownership. Gordon is president of Newton Group Transfers, which has been helping people end their timeshare ownership for more than a decade.